RBI_0
Current Affair Analysis

28th March 2019 Current Affairs Analysis -IASToppers

Regulatory Sandbox; Mission Shakti; What is CbC Report? Base Erosion and Profit Shifting (BEPS); FinTech; Banning of Unregulated Deposit Schemes Bill; Electoral Bonds; Official Secrets Act (OSA), 1923; Central Water Commission (CWC); African Union (AU); etc.
By IT's Current Affairs Analysis Team
March 29, 2019

Contents

Polity & Governance

  • In 2018, Official Secrets Act invoked in 5 cases
  • Cabinet approves acquiring of land for CWC in Telangana

Government Schemes & Policies

  • Electoral Bond Scheme has serious impact on transparency in political funding: ECI tells SC
  • Jewellers re-start monthly deposit schemes after two weeks of suspension

Economy

  • RBI plans guidelines for fintech firms to test services before rollout
  • India-US sign pact for exchange of reports to check tax evasion by MNCs

Bilateral & International Relations

  • India-African Union sign MoU on strengthening cooperation in healthcare sector

Science & Technology

  • Mission Shakti: India’s anti-satellite test

For IASToppers Current Affairs Analysis Archive, Click Here

Polity & Governanc

In 2018, Official Secrets Act invoked in 5 cases

The Ministry of Home Affairs (MHA) issued five prosecution sanction orders last year under the Official Secrets Act (OSA), 1923.

India’s Official Secrets Act 2019 6

About the Act:

India’s Official Secrets Act2019

  • The Official Secrets Act was first enacted in 1904, during the time of Lord Curzon, Viceroy of India from 1899 to 1905 and act was retained after Independence.
  • One of the main purposes of the Act was to muzzle the voice of nationalist publications.
  • The law, applicable to government servants and citizens, provides the framework for dealing with espionage, sedition, and other potential threats to the integrity of the nation.
  • The law makes spying, sharing ‘secret’ information, unauthorised use of uniforms, withholding information, interference with the armed forces in prohibited/restricted areas, among others, punishable offences. If guilty, a person may get up to 14 years’ imprisonment, a fine, or both.
  • The information could be any reference to a place belonging to or occupied by the government, documents, photographs, sketches, maps, plans, models, official codes or passwords.

Issues with Bill:

  • The law does not undergone any changes over the years.
  • It had become a contentious issue after the implementation of the Right to Information Act.
  • The Second Administrative Reforms Commission (SARC) Report, 2006, suggested that the Act should be substituted by a chapter in the National Security Act that incorporates the necessary provisions.
  • The Act does not define “secret” or “official secrets”. Public servants could deny any information terming it a “secret” when asked under the RTI Act.

Do other nations have similar laws?

  • Several countries, including the United Kingdom, Malaysia, Singapore, and New Zealand, continue to use the legislation to protect state secrets. In 2001, Canada replaced its OSA with a Security of Information Act. The “official secrets” come under the Espionage Act in the U.S.

Need for review:

  • Since the classification of secret information is so broad, it is argued that the colonial law is in direct conflict with the Right to Information Act.
  • Under Section 5, both the person communicating the information, and the person receiving the information, can be punished by the prosecuting agency.
  • The SARC report states that as the OSA’s background is the colonial climate of mistrust of people and the primacy of public officials in dealing with the citizens, it created a culture of secrecy.
  • Another contentious issue with the law is that its Section 5, which deals with potential breaches of national security, is often misinterpreted. The Section makes it a punishable offence to share information that may help an enemy state. The Section comes in handy to book journalists when they publicise information that may cause embarrassment to the government or the armed forces.
[Ref: The Hindu]

 

Cabinet approves acquiring of land for CWC in Telangana

The Union Cabinet on Wednesday approved acquiring land of the Central Water Commission at Nallagandla in Hyderabad by the Telangana government for road widening with nil charges.

Central Water Commission (CWC) 2019 - Copy (1)

About Central Water Commission:

Central Water Commission (CWC) is a premier Technical Organization of India in the field of Water Resources.

  • It is presently functioning as an attached office of the Ministry of Water Resources, River Development and Ganga Rejuvenation, Government of India.
  • The Commission is entrusted with the general responsibilities of initiating, coordinating and furthering in consultation of the State Governments concerned, schemes for control, conservation and utilization of water resources throughout the country, for purpose of Flood Control, Irrigation, Navigation, Drinking Water Supply and Water Power Development.
  • It also undertakes the investigations, construction and execution of any such schemes as required.
[Ref: The Hindu]

 

Government Schemes & Policies

Electoral Bond Scheme has serious impact on transparency in political funding: ECI tells SC

Disagreeing with the version of the Central Government, the Election Commission of India has told the Supreme Court that the ‘Electoral Bonds Scheme’ has a serious impact on transparency in political funding.

Electoral bond scheme 2019 7

What are Electoral bonds?

Electoral bond scheme 2019 6

  • Electoral bonds will be bearer instrument in nature of promissory note and an interest-free banking instrument.
  • These can be redeemed only through the registered accounts of a political party in a prescribed time frame.

2

Objective:

  • It aims at rooting out current system of largely anonymous cash donations made to political parties which lead to generation of black money in the economy.

Denominations: 

  • Electoral bonds can be purchased for any value in multiples of Rs.1,000, Rs.10,000, Rs.10 lakh, and Rs.1 crore from any of the specified branches of State Bank of India (SBI).

1

Who can purchase? 

  • A citizen of India or a body incorporated in India will be eligible to purchase the bond.
  • The purchaser is allowed to buy electoral bonds only on due fulfilment of all extant KYC norms and by making payment from a bank account. It will not carry the name of the payee.
  • In essence, the donor and the party details will be available with the bank, but the political party might not be aware of who the donor is.

Eligibility of Political parties:

  • Every party that is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has secured at least one per cent of the votes polled in the most recent Lok Sabha or State election will be allotted a verified account by the Election Commission of India. Electoral bond transactions can be made only via this account.

Validity: 

  • It will have a life of 15 days during which they can be used to make donations to registered political parties.

Availability:

  • The electoral bonds will be available for purchase for a period of 10 days each in months of January, April, July and October with additional 30 days to be specified by Central government in year of general election so that this does not become a parallel currency.

Concerns related to the conventional system of political funding:

  • The conventional system of political funding is to rely on donations. These donations, big or small, come from a range of sources from political workers, sympathisers, small business people and even large industrialists.
  • The conventional practice of funding the political system was to take donations in cash and undertake these expenditures in cash.
  • The sources are anonymous or pseudonymous. The quantum of money was never disclosed. 
  • The present system ensures unclean money coming from unidentifiable sources. It is a wholly non-transparent system.

Why Electoral Bonds are necessary?

Elections and political parties are a fundamental feature of Parliamentary democracy. 

  • Elections cost money. The round the year functioning of the political parties involves a large expenditure. Parties run offices throughout the country.  Staff salaries, travelling expenses, establishment cost are regular expenditures of political parties.  There has not been a single year where election either for the Parliament or State Assemblies have not been held. 
  • Besides expenditure of individual candidates, political parties have to spend money on election campaigns, publicity, tours, travels and election related establishments. These expenditures run into hundreds of crores.  Yet there has not been a transparent funding mechanism of the political system.

Way ahead:

  • India is the largest democracy in the world. However, despite strengthening various institutions for the last seven decades, India has not been able to evolve a transparent political funding system. 
[Ref: The Hindu]

 

Jewellers re-start monthly deposit schemes after two weeks of suspension

Even a month after banning unregulated deposits, some questions are still unanswered whether deposits taken by jewellers from customers is acceptable especially when jewellers are not regulated.

Banning-of-Unregulated-Deposit-Schemes-Ordinance-2019

  • Jewellers initially feared that the ban is applicable to them also as the monthly deposit schemes run by them remained unregulated.

Banning of Unregulated Deposit Schemes Bill:

Banning of Unregulated Deposit Schemes Bill, 2018 3

  • The Banning of Unregulated Deposit Schemes Bill, 2018 was introduced in Parliament in July 2018 after refereeing by the Standing Committee on Finance (SCF).
  • SCF submitted its 17th Report on the said Bill to Parliament in January, 2019.
  • Salient features of bill:
  • Provision of substantive banning clause which bans Deposit Takers from promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme.
  • The principle is that the Bill would ban unregulated deposit taking activities altogether, by making them an offence ex-ante rather than the existing legislative-cum-regulatory framework which only comes into effect ex-post with considerable time lags.
  • The Bill creates three different types of offences:
  • Running of Unregulated Deposit Schemes
  • Fraudulent default in Regulated Deposit Schemes
  • Wrongful inducement in relation to Unregulated Deposit Schemes.
  • Provision for severe punishment and heavy pecuniary fines to act as deterrent.
  • It has adequate provisions for repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
  • The Bill provides for attachment of properties by the Competent Authority and subsequent realization of assets for repayment to depositors.
  • Clear-cut time lines have been provided for attachment of property and restitution to depositors.
  • The Bill enables creation of an online central database, for collection and sharing of information on deposit-taking activities in the country.
  • The Bill defines “Deposit Taker” and “Deposit” comprehensively.
  • “Deposit Takers” include all possible entities receiving or soliciting deposits, except specific entities such as those incorporated by legislation.
  • “Deposit” is defined in such a manner that deposit-takers are restricted from camouflaging public deposits as receipts, and at the same time, not to curb acceptance of money by an establishment in the ordinary course of its business.
  • Being a comprehensive Union Law, the Bill adopts best practices from State laws, while entrusting the primary responsibility of implementing the provisions of the legislation to the State Governments.

Ways of banning Unregulated Deposits:

  • Deterrent punishment for promoting or operating an unregulated deposit taking scheme.
  • Stringent punishment for fraudulent default in repayment to depositors.
  • Designation of a Competent Authority by the State Government to ensure repayment of deposits in the event of default by a deposit taking establishment.
  • Powers and functions of the competent authority including the power to attach assets of a defaulting establishment.
  • Designation of Courts to oversee repayment of depositors and to try offences under the Act.
  • Listing of Regulated Deposit Schemes in the Bill, with a clause enabling the Central Government to expand or prune the list.
[Ref: Business Standard]

 

Economy

RBI plans guidelines for fintech firms to test services before rollout

The RBI is set to issue guidelines for a ‘regulatory sandbox’ for financial technology (fintech) firms within two months.

RBI plans a regulatory sandbox 2019

What is Regulatory Sandbox?

  • A regulatory sandbox is a controlled mechanism within which the sector will be able to experiment with solutions in a closely-monitored ecosystem so that the risks do not spread outside it, and the reasons for failure can be analysed.
  • It will help fintech companies launch innovative products at a lower cost and in less time.

Significance of Regulatory Sandbox:

  • The sandbox will enable fintech companies to conduct live or virtual testing of their new products and services. These companies will also be able to test the viability of the product without a wider and expensive rollout.
  • For the expansion of fintech sector, there are two main areas that required attention were:
    • How to improve the accessibility of financial platforms using fintech.
    • Analysis potential risks that may arise out of fintech adoption.
  • Systemic risks may arise from unsustainable credit growth, increased inter-connectedness, procyclicality, development of new activities beyond the supervisory framework and financial risks manifested by lower profitability.
  • It will help companies to analyse the conquests of failure and provide solutions.
  • A sandbox acts as a layer between banks and their innovation initiatives and facilitates smooth collaboration between FinTech companies and incumbents.

The need for a FinTech sandbox:

  • According to NITI Aayog, India is one of the fastest growing fintech markets globally, and industry research has projected that $1 trillion, or 60% of retail and SME (small and medium sized enterprises) credit, will be digitally disbursed by 2029.
  • The Indian fintech ecosystem is the third largest in the world, attracting nearly $6 billion in investments since 2014. Fintech or financial technology companies use technology to provide financial services such as payments, peer-to-peer lending and crowdfunding, among others.
  • Therefore, in order to protect customers and safeguard the interests of all stakeholders, and streamline their influence on the financial system, there is need for a regulatory and supervisory framework for fintech firms.

Benefits of a FinTech sandbox

  • Piloting a product or business model through a sandbox will help companies manage their regulatory risk during the testing period itself.
  • There are no restrictions on transaction size as the sandbox is in a UAT environment.
  • A sandbox could also facilitate more partnerships between legacy and start-up companies.

What is Fintech?

  • FinTech, which means using technology to offer financial services to end customers at a lower cost, has been a buzzword across the world in recent years, with little or no regulation over their functioning.
  • Fintech is an omnibus term for the use of technology to deliver all kinds of financial services. The most common areas is in fund-raising, lending, borrowing and mobile payments.

FinTech market in India:

  • The Indian FinTech market is set to double to $2.4 billion in the next four years.
  • It is in a nascent stage in the country, and many feel that start-up firms in the space would disrupt the traditional banking and financial services model.
  • The RBI is promoting two types of FinTech in India:
    • The Unified Payments Interface and
    • The Bharat Bill Payments System
  • Some areas in which FinTech has emerged include payments, peer-to-peer lending, and the use of automated algorithms to offer financial advice.
[Ref: Live Mint]

 

India-US sign pact for exchange of reports to check tax evasion by MNCs

India and the United States of America signed an Inter-Governmental Agreement for Exchange of Country-by-Country (CbC) Reports filed by the ultimate parent corporations based in either of the countries.

Country-by-country (CbC) reports 2019 5

Objective:

  • This agreement ensure that all tax authority have access to similar information on multinational enterprises’ business activities and financial statement which reduce the compliance burden on their subsidiaries operating out of these countries.

What is CbC Report?

  • The Base Erosion and Profit Shifting (BEPS) Action 13 report (Transfer Pricing Documentation and Country-by-Country Reporting) provides template for MNE’s (multinational enterprises) to report annually and for each tax jurisdiction in which they do business the information set out therein. This report is called the Country-by-Country (CbC) Report.
  • A CbC Report has aggregated country-by-country information relating to the global allocation of income, the taxes paid, and certain other indicators of an MNE group. It also contains a list of all the constituent entities of an MNE group operating in a particular jurisdiction and the nature of the main business activity of each such constituent entity.

To facilitate the implementation of the CbC Reporting standard, the BEPS Action 13 report includes a CbC Reporting Implementation Package which consists of

  • Model legislation which could be used by countries to require the ultimate parent entity of an MNE group to file the CbC Report in its jurisdiction of residence including backup filing requirements and
  • Three model Competent Authority Agreements that could be used to facilitate implementation of the exchange of CbC Reports, respectively based on the:
    1. Multilateral Convention on Administrative Assistance in Tax Matters
    2. Bilateral tax conventions
    3. Tax Information Exchange Agreements (TIEAs)

Provisions of CbC Reports:

  • The Income Tax Act requires Indian subsidiaries of multinational companies to provide details of key financial statements from other jurisdictions where they operate.
  • This provides the IT department with better operational view of such companies, primarily with regards to revenue and income tax paid.
  • This information is to be made available to the tax authorities in all jurisdictions in which the MNE operates. This was seen as placing a huge compliance burden on the subsidiary companies of these MNEs.
  • The agreement revalidates the keen willingness of Indian and U.S. tax authorities to engage and amicably resolve issues for taxpayers.
  • The provision was a part of the base erosion and profit shifting action plan, and later incorporated in IT Act also.

Significance of Inter-Governmental Agreement for exchange of CbC:

  • Signing the agreement is a key step in making India compliant with the Base Erosion and Profit Shifting (BEPS) project, of which it is an active participant.
  • It would also obviate the need for Indian subsidiary companies of US MNEs to do local filing of the CbC Reports, thereby reducing the compliance burden.

What is Base Erosion and Profit Shifting (BEPS)?

  • Base erosion and profit shifting refers to the activities of multinational corporations to shift their profits from high tax jurisdictions to lower tax jurisdiction, thereby eroding the tax base of the high tax jurisdictions and depriving them of tax revenue.
  • In order to combat this, many countries entered into agreements to share tax information with each other to enhance transparency and make such profit shifting that much harder.
[Ref: PIB, Economic Times]

 

Bilateral & International Relations

India-African Union sign MoU on strengthening cooperation in healthcare sector

An agreement has been signed between India and the African Union to initiate and strengthen the cooperation in health sector in a structured and organised manner by establishing an India-Africa health sciences collaborative platform.

India_signs_MoU_with_African_Union_in_healthcare_sector

African Union (AU):

African Union

  • The African Union (AU) is a continental union consisting of 55 countries of the continent of Africa.
  • The bloc was founded on 26 May 2001 in Addis Ababa, Ethiopia and launched on 9 July 2002 in South Africa.
  • Headquarter of the AU is in Addis Ababa, Ethiopia.
  • The most important decisions of the AU are made by the Assembly of the African Union.
  • They have adopted a gold, green and red based emblem and flag to represent the continental union.
  • Parent organisations of the AU are Organisation of African Unity, African Economic Community.

 Objectives of the AU:

  • To achieve greater unity, cohesion and solidarity between the African countries and African nations.
  • To accelerate the political and social-economic integration of the continent.
  • To promote democratic principles and institutions, popular participation and good governance.

Members:

  • All UN member states based in Africa and on African waters are members of the AU.
[Ref: Economic Times]

 

Science & Technology

Mission Shakti: India’s anti-satellite test

With the test of Mission Shakti, an anti-satellite missile test, India joins an elite club of space superpowers having the capability to target satellites in outer space.

What is Mission Shakti-2019-1 (1)

[Kindly go through the Mains Article on ‘Mission Shakti’ in Mains Article section to be posted on 30th March 2019]

 

Topics
Current Affairs Analysis Popular
Tags

Facebook

My Favourite Articles

  • Your favorites will be here.

Calendar Archive

April 2019
M T W T F S S
« Mar    
1234567
891011121314
15161718192021
22232425262728
2930